The World Bank Group has recommended some policy measuresto tap the unutilised potential to reap benefits from Nepali goods beingexported to the markets of GSP (generalised system of preferences) grantingcountries that include the United States of America, European Union, Japan,Australia and other developed countries.

GSP is a preferential tariff system, which provides aformal system of exemption from the more general rules of the World TradeOrganisation (WTO), especially by the developed countries to the leastdeveloped countries (LDCs) like Nepal, to support the latter achievesustainable economic growth through exports.

Nepal has been exporting goods under the GSP facility tovarious countries, including the European Union and the United States. However,utilisation rates of GSP related export opportunities by Nepali firms is low.“Firms exporting products that are in principle eligible to receivepreferential treatment under GSP may not be using the preference. This islikely related to challenges complying with rules of origin,” said the WorldBank’s recent case study of Nepal titled ‘Trade Policy Reforms for the 21stCentury’.

“While there is little that Nepal can do to make rules oforigin more user-friendly, the government can support exporters in complyingwith them by building firms’ capabilities around book-keeping, and managementof input certification as requested by border agencies in the United States,EU, and other GSP-granting countries.”

The case study recommends the Ministry of Commerce to worktogether with the different trade representatives of each GSP-granting countryor bloc.

It has suggested the government and exporting firms todiversify the market and use better-designed export promotion instruments.

It has also recommended redesigning the cash incentive toexporters by allocating the subsidy to new rather than existing flows, byimplementing the fast track system for certification of domestic value addedproducts, and by introducing clear rules of allocation of funds, such as alottery. Allocating funds to provision of export intelligence services forhigh-potential markets and products as identified in this report and subject tostrict monitoring and evaluation mechanisms could be an effective way tosupport exporters.

Citing that foreign direct investment (FDI) and trade arecomplementary to each other, the study stressed that Nepali export firms needto participate in global value chain (GVC) as well as regional value chain andattract FDI to participate in the global production network.

The study has recommended some of the steps to streamlinethe FDI flows. It has suggested to simplify the processes for repatriation offunds of multinationals, introducing automatic notification systems;re-evaluating the rationale of low equity limits for foreign ownership inselected business and professional services (legal, accounting and engineering)as well as banking and finance; reconsidering long negative list in the newforeign investment policy; removing restrictions on non-equity modes ofinvestment for franchising and increasing transparency in firms’ approval,registrations, and trademark registration processes.

To improve the overall export climate, the study recommendscontinuing efforts to attract investments in hydropower to ensure behind theborder long-run supply of electricity at competitive costs.

The study also suggested promoting competition in keybackbone services markets, specifically in transport and logistics, as well asin finance as the some of the service sectors have high potential to grow inNepal. There is also recommendation for minimising rigidities in the labourmarket, and ensure access to qualified labour.